Reference no: EM132945953
Question - Zambales Company acquired property in 2016 which contains mineral deposit. The acquisition cost of the property was P20,000,000. Geological estimates indicate that 5,000,000 tons of mineral may be extracted. It is further estimated that the property can be sold for 5,000,000 following mineral extraction. For 2,000,000 Zambales is legally required to restore the land to a condition appropriate for resale. After acquisition, the following cost were incurred:
Exploration cost 13,000,000
Development cost related
to drilling wells 10,000,000
Development cost related to production equipment 15,000,000
The company extracted 600,000 tons of the mineral in 2016 and sold 450,000 tons. In the 2016 income statement, what amount of depletion is included in cost of sales?
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